The tax credit bill recently signed into law by President Obama extends the $8000 First Time Home Buyer (FTHB) tax credit. A FTHB will need to have a property under contract no later than April 30, 2010 and the deal must be closed by June 30, 2010 in order to claim the credit. A FTHB is defined as one who has not owned a house for at least 3 years. Single tax filers who earn up to $125,000 per year are eligible for the entire amount. The credit is phased out for those above that income level and ceases completely at $145,000 annual income. Joint filers qualify for the full credit up to $225,000 annual income with the same phase out up to $245,000. The tax credit is a refundable credit which means that even if the filer is getting a refund, the total amount of the credit is added on to it. For example, I am getting a $2000 refund and I qualify for the full $8000 credit. The IRS will send me a check for $10,000.

The home seller credit of $6500 is payable to the filer who sells by 4/30/2010 and closes the deal by June 30, 2010 provided that they have owned and occupied a property as a principle residence for 5 out of the last 8 years. They must also purchase a replacement property in this same time frame to qualify for the credit.

These credits cannot be claimed in advance of closing on the property. They also do not apply if you are buying a property from a close relative. If you are taking advantage of the credit I 2009, you may claim that on your 2009 return or you can file an amendment to your 2008 return.